The article explores how to design the best tax system for different types of income. By analyzing how people react to tax changes and considering the overall economic impact, the researchers suggest that a combination of nonlinear taxes on personal income and linear taxes on capital income is most effective. They found that including all income sources in the personal income base and subsidizing the more elastic income source is beneficial. Cross-base responses have minimal effects on personal income taxes but increase capital tax rates. General equilibrium effects also raise the capital tax rate.